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Goods and Service Tax

Bimal Upadhyay
19/10/2020 0 0

Goods and Services Tax (GST)
It is an indirect tax levied by the Central Government. In this tax ·there are so many taxes
merged such as Excise Duty, Customs Duty, Service Tax, Value Added Tax,
Entertainment Tax and Lottery Tax etc. The purpose of GST is to make one nation
and one tax.

Important Terms Related to GST
There are various terms related to GST, which are as follow
(i) Manufacturer The person who produces goods for sale, is called the manufacturer.
(ii) Dealer The person, who purchases goods for resale, is known as a dealer (trader).
(iii) Turnover The total amount received from the sale of goods (excluding tax) by a dealer
during any fixed period, is called turnover.
(iv) Intra State Sales Suppose a person make a business and they sales their goods (items)
and provide their services in the same state (or union territory), then it is said to
be Intrastate sales.
(v) Inter-State Sales Suppose a person make a business and they sales their goods (items)
and provide their services outside the state (or union territory), then it is said to be
Interstate sales.
(vi) Input GST The tax paid by a dealer on his/her purchase of goods and providing
services is called Input GST.
(vii) Output GST The tax charged by a dealer on his/her sales of goods and providing
services is called output GST.

Different Types of Taxes Used in GST

In this system, there are three taxes applicable, which are given below
(i) State (or Union Territories) Goods and Service Tax (SGST or UTGST) the State collects this tax (or union territory) Government on an intra-state sale. e.g. Suppose any goods are manufacturing in Uttar Pradesh and sales these goods also in Uttar Pradesh, then tax on this transaction is said to be SGST.

(ii) Central Goods and Services Tax (CGST) This tax is collected by the Central Government on an intrastate sale.
Both SGST (or UTGST) and CGST are levied on intrastate (i.e. same state) sales of goods and services. In intra-state sales, GST is equally divided between Central and State Governments.
e.g. Suppose a dealer of Tamil Nadu sells some goods at the rate of Rs4000 to the consumer in the same state (i.e. Tamil Nadu). Suppose GST is charged at the rate of 18% on that goods, the GST will comprise of CGST at the rate of 9% and SGST at the rate of 9%. Therefore, the seller will collect the CGST amount of Rs 360 (i.e. 9% of4000), and this amount goes to the account of the Central Government and seller will also collect the SGST amount of Rs360 (i.e. 9% of4000) which will go to the account of the State Government of TamilNadu.
Hence, the dealer collects the 18% GST amount on Rs4000 (i.e. Rs720), which will equally (i.e. 360 each)
distribute in State (i.e. Tamil Nadu) and Central
Government

(iii) Integrated Goods and Services Tax (IGST) It is levied on interstate sales of goods and services outside the state. This tax is also levied on the import of goods and services from one country to another country.
This tax is collected only by the Central Government for inter-state sales. e.g. Suppose a dealer from Gujarat sells goods worth of8000 to another dealer in Rajasthan. Suppose the rate of GST is 12% on the goods, then the seller will collect 12% of 8000 (i.e. 960) under as IGST, and the whole amount of IGST will go to the Central Government.

Objectives and Advantages of GST
Some of the objectives and advantages are given below
(i) The vital advantage is that to reduce the multiplicity of taxes and make a unified common national market.
(ii) Through GST, the tax system becomes more transparent, regular, and predictable.
(iii) Ease of doing business It means there are some administrative rule set up between the Central
Government and State Government, so that there is no interruption of doing business.
(iv) Reduce Tax Evasion Some of the persons are evading tax. To reduce tax evasion, use GST. In this
procedure, each taxpayer registered under GST to make a GST return file electronically for each transaction (either purchase or sale), and this file should match with the input GST credit against the output GST and lastly paid net GST.

Basic Terms Required to Solve the Questions
There are various basic terms, which are as follow
(i) Cost Price (CP) The price, at which an article is bought, is called its cost price. All the overhead expenses in the transaction like freight, damage, etc., are added to the cost price.
(ii) Selling Price (SP) The price, at which an article is sold, is called its selling price.

(iii) Profit When the selling price of a commodity is more than its cost price, then we are in profit, and Profit= SP - CP gives it and Profit%=(profit/cp) x 100
CP
(iv) Loss When the selling price of a commodity is less than its cost price, then we are in loss, and it is given by
Loss = CP- SP and Loss% = (loss/cp)X 100
CP
(v) Marked Price (MP) The price of an article excluding tax, is known as marked price. It is also, known as a list price, quoted price, printed price, catalogue price, an introductory price.
(vi) Discount The reduction in the price of the object given by the shopkeeper to the customer, is known as a discount.
Discount=(rate of discount x market price)/100

or Discount= Marked price - Selling price

Example 1. Mr Sharma goes to a shop and buys a Jacket having cost t 1180 (list price). The rate of GST
18%. He tells the shopkeeper to reduce the price to such an extent that he has to pay t 1180 inclusive of GST. Find the reduction needed at the price of the jacket.

 Solution

Let the reduced price of the jacket bet Rs x.

Then, the amount of GST on Rs x = 18% of x=(18/100)*x

:. Mr Sharma pays the amount for the jacket = x+(18/100)x

                                                                  =(59/50)X

According to the given condition,

(59/50)X=1180

or, x=1180*50/59

or, x=1000

:. Reduced price of the jacket= Rs 1000

Thus, the reduction needed at the price of the jacket

(1180-1000) = Rs180

Example 2. The price of a motorcycle is t 44880 including tax (under GST) at the rate of 18% on its listed price. A buyer asks for a discount on the listed price so that after charging GST, the selling price of the motorcycle becomes equal to the listed price. Find the discount amount in which the seller has to allow for the deal.

Sol.

Let the listed price of the motorcycle be Rs x and the discount bet y.

Amount of GST on Rs x = 18% of x=(18/100)x=(9/50)x

The selling price of the motorcycle including tax=x+(9/50)x

                                                                    =(59/50)x

 According to the given condition,

(59/50)x= 44880

or, x=44880*50/59

or, x=38034

:. The list price of the motorcycle = Rs 38034

Now, the reduced price of the motorcycle = (38034-y)

Amount of GST on(38034-y)

                      =18% of (38034-y)

                      =(9/50)(38034-y)

The new selling price of the motorcycle including GST

= (38034-y) +(9/50)(38034-y)

=(59/50) (38034-y)

According to the given condition, Selling price of motorcycle including GST = Listed price of the motorcycle

            (59/50) (38034-y)=38033

           or, 2244006- 59y = 1901650

           or, 59y = 342356 

            or,  y = 5803
Hence, the amount of discount is Rs5803.    

EXERCISE   

1. Miss Anjali goes to a mall to purchase a saree whose cost is Rs 885 (list price). She tells the shopkeeper to reduce the price to such an extent that she has to pay Rs 885, inclusive GST which is at the rate of 18%, find the reduction of price needed in the saree.

2. Sandeep purchased a digital camera for Rs 25488, which includes a 10% rebate on the list price and 18% tax (under GST) on the remaining price. Find the marked price of the digital camera.

3. The price of a spider toy is Rs3136 inclusive tax ( under GST) at the rate of 12% on its listed price. A buyer asks for a discount on the listed price so that after charging GST, the selling price becomes equal to the listed price. Find the amount of discount which the seller has to allow for the deal.

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